Upside-down — and Unsustainable

Imagine you bought a new car. You did the research, read up on the make and model, took a test drive and went back and forth with the dealership until you struck a deal you could live with. You drove home satisfied.

Now, imagine it’s three months later. You’ve put a few miles on your new car and you’re enjoying driving it. You check your mailbox one afternoon and, lo and behold, you find an invoice from the dealership notifying you that they have transferred an additional couple thousand dollars from your bank account.

Smoke comes out your ears. It’s outrageous, right? That deal was done when you drove away with your new car.

Unfortunately, because of how our prescription drug payment system currently operates, something like that happens almost daily in community pharmacies — and it’s not only the pharmacy that has to pay for those after-the-fact bills. Medicare Part D patients pay a price, too.

It’s called pharmacy “direct and indirect remuneration,” or pharmacy DIR for short. On Medicare Part D claims, pharmacy DIR fees are clawed back from pharmacies weeks or even months after a medication has been dispensed and the patient has left the pharmacy. They are unpredictable, and often, the vague explanation to the pharmacy is even missing documentation as to which prescription the clawback relates to.

It’s awfully difficult to run a pharmacy small business when you have no idea at the point of sale if you’re going to make a small profit, break even, or, thanks to retroactive pharmacy DIR fees, end up upside-down and losing money on a medication you’re dispensing. And on many Part D claims in many community pharmacies, upside-down is becoming the unsustainable norm.

For Part D patients, the effect of those pharmacy DIR fees is more insidious. Because the pharmacy benefit manager that administers a senior’s Part D plan assesses the higher “pre-pharmacy DIR fee” price at the pharmacy counter, rather than the lower net price after the fee is assessed on the pharmacy, seniors reach their deductible sooner, at which point they’re pushed more quickly into the so-called Part D “donut hole” and are responsible for paying more out of pocket for their prescriptions.

It’s just not right. And it’s getting worse.

The use of these fees on pharmacies increased 45,000 percent since 2010. This must be fixed or, ideally, eliminated altogether.

To fix at least part of the clawback problem, policymakers should require that all pharmacy DIR fees be accounted for at the pharmacy counter, not after the fact.

This would assure that seniors are assessed the lower net price for their medications. And small business pharmacy owners would have greater predictability of cash flows. No more unexpected bills months after a transaction.

The powerful pharmacy benefit manager mega-corporations have long resisted transparency policies like this one, because their bottom lines benefit from secrecy in all their business tactics. You may not know it, but they determine which pharmacies will be included in a prescription drug plan’s network, how much patients pay at the pharmacy counter, and how much pharmacies are reimbursed for their services. Some entice plan sponsors to require that plan beneficiaries use a mail-order pharmacy — often one also owned and operated by the PBM.

They also determine which medications will be covered by the plan (the plan’s formulary), and drug manufacturers often pay “rebates” to PBMs to get their drugs onto those formularies. While their role goes largely unnoticed by patients, you can bet PBMs have an effect on patients’ ability to access and afford medications. The very opaque nature of the traditional PBM business model adds hidden costs and leads to ever-higher drug costs.

Consumers shouldn’t get ripped off — not when buying a car, and especially not when accessing needed, potentially life-saving medications.

Community pharmacists support efforts to eliminate retroactive pharmacy DIR fees so patients aren’t paying more than they should and pharmacies aren’t having money taken from them after the transaction was done. We urge the Trump administration to revive and finalize provisions to fix pharmacy DIR fees and strongly encourage legislators — including those on the Senate Finance Committee — to include a fix for this issue in any drug pricing legislation. Join us in this fight.


Karry La Violette is senior vice president of government affairs at the National Community Pharmacists Association.

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